Mobile mogul Craig McCaw's latest venture, wireless Internet service provider Clearwire (NASDAQ:CLWR), raked in $600 million last week in its IPO. It sounds like a lot of dough, but Clearwire's shaky business model, fierce rivals, and expensive operations will likely require even more cash over the next few years.

Clearwire is the second-largest holder of the 2.5 GHz licensed spectrum, which reaches roughly 214 million people in the United States. The spectrum allows for data transfer speeds equivalent to wireline broadband, with far less potential interference than Wi-Fi or other wireless approaches.

The success of Clearwire's network depends upon the adoption of WiMAX technologies. If computer and mobile device manufacturers agree to use the WiMAX standard, the value of Clearwire's network should increase. The company has attracted $1.1 billion in strategic investments from Intel (NASDAQ:INTC), Motorola (NYSE:MOT), and Bell Canada.

That all sounds promising, but Clearwire's strategy is hardly unique. Sprint Nextel (NYSE:S) is deploying its own WiMAX network, while Verizon (NYSE:VZ) and other wireless providers employ competing technologies.

Clearwire's enormous investment requirements pose an additional problem. The company shelled out $300 million for 2.5 GHz spectrum rights from AT&T (NYSE:T), and it will likely need to buy more spectrum. It also faces significant expenses in sales and marketing, customer service, equipment purchases, maintenance and R&D.

To finance these efforts, Clearwire has issued two secured notes, a term loan and a corporate loan, for a total of $755.6 million. Assuming no recapitalizations, the company will pay $84.3 million and $1.3 million in interest and principal, respectively, in 2007.

What business model does Clearwire offer to justify these expenses? The company sells one- or two-year contracts, including activation fees, monthly charges, and ancillary services like VOIP and Web hosting. For 2006, the company increased its revenue by $66.7 million to a total of $100.2 million, but on the bottom line, it sustained a $284.2 million loss.

According to its prospectus, Clearwire expects its losses to continue for some time. It predicts a whopping $800 million in cash needs for 2007 -- and that doesn't even include spectrum costs.

Even if Clearwire doubles revenues in 2007, the company will quickly devour its IPO proceeds, and it'll probably need to go back to investors for more. That's a scary prospect for investors, so it's not surprising that the stock is already volatile, with a 10% drop on Friday and another 8% drop in Monday trading. For Foolish investors, it's probably a good bet to stay clear of Clearwire.

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is ranked 1,474 out of 23,901 in Motley FOol CAPS.